L&T reports ₹2,553 crore Q3 net profit, sees boost from major private capex investments

• Construction and engineering behemoth L&T on Monday reported a consolidated net profit of ₹2,553 crore for the December quarter.
  
• Its revenue grew 17% YoY to ₹46,390 crore during the quarter, driven by an improvement in the execution of infrastructure projects.
  
• The company said it remains optimistic about growth prospects on the back of an expected revival in India Inc’s capex cycle.
• The company’s CFO R Shankar Raman is optimistic about exceeding the order inflow guidance of 12-15% for full FY23.
  

Construction and engineering behemoth Larsen & Toubro (L&T) on Monday reported a consolidated net profit of ₹2,553 crore for the third quarter, rising 24% over last year, boosted by infra projects and IT & technology services segment. The company said it remains optimistic about exceeding its order inflow guidance for FY23.

The company said it gained from an improvement in the execution of infrastructure projects as well as continued momentum in the information technology and technology services segment. Its revenue for the quarter rose 17% YoY to ₹46,390 crore. International revenues remained consistent and constituted 37% of the company’s topline.

The company’s earnings before interest, taxes, depreciation and amortisation (EBITDA) margin contracted slightly during the quarter – L&T reported EBITDA margins of 10.92% in Q3, down from 11.4% a year ago.

While Q4 is a traditionally strong quarter for L&T, the company’s chief financial officer, R Shankar Raman was optimistic about exceeding the order inflow guidance of 12-15% for FY23 . “All that I can mention is we will exceed the order guidance that we have given, but by how much, I don’t know. That would be speculative, but there is no concern.”

‘Major private capex investments are likely’

L&T reported a 21% YoY growth in its order inflows – at the group level, the conglomerate received orders worth ₹60,710 crore, of which international orders constituted 25%, or ₹15,294 crore.

"This growth [in order inflows] was largely driven by an uptick in the orders from the domestic markets. Traditionally, Q4 is a big quarter for us for new projects, and we hope that trend continues," Raman said.

The company’s consolidated order book stood at ₹3.87 lakh crore at the end of Q3, with the share of international orders at 26%.

“Bulk of the order book that we have are in areas where there has been a significant attention paid for completing the projects and that augurs well for the revenue visibility of the company,” Raman said during the post-earnings call, projecting optimism about the company’s topline prospects.

L&T is banking on the revival of India Inc’s capital expenditure cycle – earlier, a report by the Reserve Bank of India underlined that the various initiatives of the government and improved corporate balance sheets are expected to revive the capex upcycle.

“Major private capex investments are likely in energy transformation, emerging tech, healthcare, logistics, industrial parks, data centres etc., which augurs well for the EPC and construction business,” L&T said, expressing optimism about its growth outlook.

Infrastructure and IT segments drive growth in order inflows

The stars of L&T’s Q3 were the infrastructure and IT segments – over half the order inflows during the quarter were in the infrastructure segment, at ₹32,530 crore, recording a growth of 28%.

The EBITDA margins of the infrastructure segment contracted to 7% in Q3 from 7.1% in the same period last year. Raman said the softness in this segment’s margins is due to the inflationary pressures, but noted that much of the contracts of the company have cost variation clauses built-in, which should help it relieve the inflationary pressures to an extent.

On the other hand, the IT & technology services segment reported a growth of 25% YoY to ₹10,517 crore. However, EBITDA margins contracted considerably – to 19.2% in Q3, compared to 23.6% a year ago. “The segment margin was impacted mainly due to one-time merger integration expenses in LTIMindtree,” the company said, explaining the sharp decline in this segment’s margin during the quarter, noting that 93% of the segment revenue was from international markets.

L&T’s energy projects segment registered a growth of 12% YoY to ₹9,051 crore during Q3, primarily on account of a large domestic order in the hydrocarbon business.

L&T managed to reduce its net working capital during the December quarter, allowing it to deliver a better return on equity to its shareholders. Its net working capital stood at 19% in the December quarter, down from 22.9% a year ago. “Considering the scale and complexity of the organisations and businesses L&T runs, this is a significant reduction in the resource deployment of the company,” said Raman.

L&T’s Q3 in numbers:


Source: Company reports

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